Scottish recovery set to trail rest of the UK

SCOTLAND will continue to underperform the rest of the UK for the next year as a result of “disturbing weaknesses” in its service-sector economy, according to research released today by the influential Ernst & Young Scottish ITEM Club.

Scotland won't recover from the recession until after the rest of the UK does

In its annual forecast, the think tank says that the private-services sector, which includes financial services, will drag down the performance of Scotland‘s economy as it starts a slow recovery.

Scotland’s financial services sector has been the biggest underperformer since the onset of the recession, due to the fallout from the banking crisis. in the year to June, output in the sector shrank by a whopping 8.4 per cent compared with 0.8 per cent in the UK as a whole.

The think tank predicts the Scottish economy will contract by 4.9 per cent this year, and that GDP growth in 2010 will be just 0.7 per cent. in contrast, UK GDP is expected to contract 4.6 per cent in 2009 and grow 1.1 per cent next year.

Dougie Adams, senior economic advisor to the Ernst & Young Scottish ITEM Club says: “Scotland has a diverse economy and there are some areas, including crucial parts of the manufacturing sector, which are weathering the recession better than in the UK as a whole.

“However, the recession has exposed a number of areas where there is disturbing weakness, not least financial services, business services and the hotel and catering sectors.”

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